Commercial Property Editor

DEXUS Property has ended the calendar year with the $503.7 million purchase of key Sydney assets, after raising a similar amount with the sale of 27 US industrial properties.

In the latest deal the group exchanged contracts to acquire interests in a portfolio of three Sydney office properties including the purchase of one property jointly with DEXUS Wholesale Property Fund (DWPF).

The properties to be acquired include: a 25 per cent interest in 225 George Street, Sydney, a premium-grade office building also commonly known as Grosvenor Place; a 50 per cent interest in 2 and 4 Dawn Fraser Avenue, Sydney Olympic Park, and the joint (50/50) purchase of 39 Martin Place, Sydney with DWPF.

The Sydney portfolio has been acquired off-market from the Direct Property Investment Fund (DPIF), a wholesale office fund, managed by the property division of Colonial First State Global Asset Management.

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DPIF is a closed-end fund and is currently in its wind-down phase.

The chief executive of DEXUS, Darren Steinberg said he was pleased to be able to announce the reinvestment of a significant portion of the sale proceeds from the US industrial portfolio into quality Australian office assets in one of our core office markets.

On Thursday Mr Steinberg announced the group had raised $561 million through the sale of majority of its United States (US) industrial portfolio.

The deal was done in two separate transactions, with 26 of 27 US properties sold, comprising 23 US industrial properties and three land parcels in Texas.

He said an entity advised by Chicago-based Heitman LLC, exchanged unconditional contracts to acquire a portfolio of 25 properties.

Brokers said the two deals were positive for DEXUS and the overall real estate investment trust sector, which is poised for a bigger and more active coming 12 months.

The head of property research at Bank of America Merrill Lynch, Simon Garing, said he thought Mr Steinberg, had done a great job in achieving a number of quick wins.

‘‘The sale by DEXUS of the bulk of its US portfolio at a 13 per cent premium to book value would now set the stage for the next phase of growth,’’ Mr Garing said.

‘‘The company highlighted gearing will be 24 per cent post the sale, with mgmt happy to ramp up to 35 per cent at this point in the cycle, giving the company about a $1 billion ‘‘war-chest’’ with the focus on Australian CBD office acquisitions.’’

Simon Scott, an analyst at Moelis & Company, said the latest office deals was a good outcome for DEXUS given the premium paid allowed the company to fund the transaction costs, breaking of swaps and the cost of setting $US debt into $A.

‘‘Driven by about $5 million per annum of corporate cost savings from closing the US operations, the deal is funds from operational (FFO) neutral and marginally net tangible asset (NTA) accretive,’’ he said.

‘‘The sale of the US assets improves the quality and risk profile of the group’s earnings and allows it to focus on one geographic jurisdiction within its core asset classes.

‘‘Furthermore, the resultant reduction in gearing and access to low cost funding will allow the company to continue growing its portfolio domestically.’’

He said that while his firm was cautious on the office sector, DEXUS may achieve earnings per security (EPS) growth through acquisitions to offset potentially softening core income

‘‘If DEXUS continues to trade at an NTA premium to its office peers then mergers and acquisitions opportunities may come onto its radar,’’ he said.